interim financial report at march 31, 2017...plc and ing bank n.v., milan branch. during the month...
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Interim Financial Report
at March 31, 2017
1
PIRELLI & C. Società per Azioni (Joint Stock Company)
Milan Office
Viale Piero e Alberto Pirelli n. 25
Share Capital Euro 1,345,380,534.66
Register of Companies of Milan No. 00860340157
REA (Economic Administrative Index) No. 1055
2
PIRELLI & C. S.p.A. - MILAN
SUMMARY
Macroeconomic and market scenario pg. 4
Significant events of the first quarter of 2017 pg. 6
Group performance and results pg. 8
Significant events subsequent to the end of the quarter pg. 22
Alternative performance indicators pg. 23
Other information pg. 25
Financial Statements pg. 28
3
Board of Directors 1
Chairman Ren Jianxin
Executive Vice Chairman and CEO Marco Tronchetti Provera
Directors Yang Xingqiang
Carlo Acutis
Bai Xinping
Gustavo Bracco
Giorgio Luca Bruno
Ze'ev Goldberg
Andrey Kostin
Jiao Chonggao
Emerson Milenski
Luca Rovati
Igor Sechin
Yang Xun
Wang Dan
Zhang Haitao
Secretary of the Board Alberto Bastanzio
Board of Auditors 2
Chairman Francesco Fallacara
Statutory Auditors Fabrizio Acerbis
Fabio Artoni
Giovanni Bandera
David Reali
Alternate Auditors Fabio Facchini
Giovanna Oddo
Independent Auditing Firm 3 PricewaterhouseCoopers S.p.A.
------------------------------------------------------------------------------------------------------------------------------
1. Appointment: March 15, 2016. Expiry: Shareholders’ Meeting convened for the approval of the Financial Statements at
December 31, 2018.
2. Appointment: March 14, 2015. Expiry: Shareholders’ Meeting convened for the approval of the Financial Statements at
December 31, 2017, (David Reali, Giovanni Bandera and Fabrizio Acerbis appointed by the Shareholders’ Meeting on
March 15, 2016).
3. Appointment: April 27, 2017. Expiry: Shareholders’ Meeting convened for the approval of the Financial Statements at
December 31, 2019 (up until April 27, 2017 the role of Independent Auditing Firm had been entrusted to E&Y
S.p.A.).
4
MACROECONOMIC AND MARKET SCENARIO
Global economic growth prospects improved during the first quarter of 2017 thanks
to the cyclical recovery in the manufacturing sector and in international trade, which
benefited both advanced and emerging countries.
For the American economy, growth for the first quarter (+0.7%) confirmed the
positive performance of economic activity with a recovery in investment and exports,
while temporary factors put a brake on private consumption. The unemployment rate
fell to 4.5% in March 2017, household confidence reached levels that had not been
seen since 2000 and confidence in the manufacturing sector exceeded levels from
two years ago. In Europe, solid growth was reflected by the good performance of the
GDP for the Eurozone for the first quarter with growth of +0.5% following similar
growth of +0.5% for the last quarter of 2016. Deflation fears fell away thanks to the
+1.5% rise in overall consumer prices in the Eurozone during March, compared with
the zero growth of one year ago. The strengthening of commodity prices during the
last twelve months facilitated a recovery for raw materials producing countries such
as Russia, which came out of the recession during the fourth quarter of 2016, and
Brazil where the latest economic indicators confirmed an easing of recession
conditions. China recorded a higher than expected growth rate for the first quarter of
+6.9% compared to +6.7% for the fourth quarter of 2016.
On the exchange rate front, the Euro recorded an average exchange rate of 1.06
against the US Dollar for the first quarter of 2017 which represented a decrease of
-3.4% compared to the average rate of 1.10 for the first quarter of 2016. The Chinese
Renminbi also weakened slightly against the US Dollar during the first quarter
recording an average price of 6.89 Yuan per US Dollar, which represented a
depreciation of -5% compared to the corresponding quarter of 2016. The currencies
of Brazil and Russia on the other hand, were strengthened by the recovery in
commodity prices and the effect of the Federal Reserve's monetary policy which was
more accommodating than expected. During the first quarter of 2017 the Brazilian
Real appreciated by +24% against the US Dollar while the Rouble appreciated by
+27% compared to the corresponding quarter of 2016.
5
The rise in commodity prices was sustained by cuts in crude oil production by the
OPEC countries. With regards to metals, the rise was attributable mainly to the
recovery in demand from China. The price of oil continued its gradual recovery with
a Brent average price of USD 55 per barrel for the first quarter of 2017 which
represented an increase of +50% compared to the average of USD 35 per barrel for
the corresponding quarter of 2016. The price of butadiene strengthened further with
an average of euro 1,363 per ton for the first quarter of 2017, which was more than
double compared to the average price of Euro 551 per ton for the corresponding
quarter of the previous financial year. The price of natural rubber also shifted during
the first quarter of 2017, rising to an average price of USD 2,095 per ton which
represented an increase of +82% compared to USD 1,150 per ton for the first quarter
of 2016 and an increase of +26% compared to the fourth quarter of 2016.
Sales figures for tyres for the first three months of 2017 confirmed growth across
both advanced and emerging countries for the Consumer segment. The overall
market recorded growth of +5% for the first quarter of 2017 compared to the
corresponding period of the previous financial year, while the Premium segment
recorded growth of +11%, with both showing slight acceleration compared to the
2016 average growth rate. The positive market trend continued to be solid in Europe
(car Replacement +4%, of which over +10% was for the Premium segment and +3%
for Original Equipment), and China (car Original Equipment +9%). The market trend
in North America began to show signs of recovery during the first quarter of 2017
(car Replacement +2%, of which 9+% was for the Premium segment and +2% for car
Original Equipment). In Latin America and Russia, the change in trend seen during
the last months of 2016 was confirmed during the first quarter of 2017 with positive
signs for both the Replacement and Original Equipment channels (LatAm car
Replacement +11%, car Original Equipment +19% and for Russia car Replacement
+16%, car Original Equipment +18%).
6
SIGNIFICANT EVENTS OF THE FIRST QUARTER OF 2017
On January 13, 2017, the agreement signed on December 28, 2016 between Pirelli
and Cinda for the disposal to the latter of 38% of Pirelli Industrial S.r.l capital - was
finalised – as part of the broader reorganisation and integration of the Industrial
business. The sale was for euro 266 million.
On February 9, 2017 Pirelli announced a price increase in all European and North
American markets for car, light truck and motorcycle tyres, for all product ranges
(summer, all-season and winter) and brands of the Group. The increases which
became effective as of April 1, 2017 will not exceed +9%. The increase was due to
the rising price of major commodities and the increasing investment in the
development of highly technological products.
On February 14, 2017 Pirelli presented its new Motorsport season which sees the
company committed - in addition to the Formula One World Championship - to over
340 championships, including for cars and motorcycles, for a total of 2,200 events
across all five continents. The presentation which coincided with the 110 year
Anniversary in Motorsports for Pirelli was held at the Turin Automobile Museum.
On March 7, 2017 Pirelli presented two new products at the Geneva Motor Show,
which was consistent with its strategy of focusing on the Premium and Prestige
segments, and of expanding the range of services for the consumer:
- the coloured editions of the P Zero and the Winter Sottozero tyres, for which
Pirelli engineers have developed, thanks to Pirelli’s experience with F1,
innovative materials and finishes capable of ensuring bright and long lasting
colours;
- Pirelli Connesso which offers a digital platform which is integrated into the P
Zero and Winter Sottozero tyres, available on the replacement market in black
or coloured, and which thanks to the sensor fixed to the hollow recess of the
tyre (i.e., on the inner wall of the tyre itself) is connected to an app and is able
to communicate with the motorist and provide information on certain basic
7
parameters concerning the functioning of the rubber, in addition to a range of
other personalised services.
This dual innovation, which signals the entrance of Pirelli as a key player into the
digital tyre market, is part of the tailor made strategy for the long P, which aims at
manufacturing customised tyres designed to meet personalised needs, safety and
performance requirements, as well as reducing consumption.
On March 13, 2017 Pirelli Industrial S.r.l. (indirectly controlled by Pirelli & C.
S.p.A. through TP Industrial Holding S.p.A.), for the purpose of ensuring full
financial autonomy, successfully signed a euro 600 million loan with a 3 year
duration (renewable up to a maximum of 5 years) with Bank of America Merrill
Lynch International Limited, China Construction Bank (Europe) S.A., HSBC Bank
Plc and ING Bank N.V., Milan Branch.
During the month of March 2017, for the purpose of ensuring an independent growth
path and independent development strategies, the two business areas - Consumer and
Industrial - were definitively separated with the assignment to Marco Polo
International Italy S.p.A. of all the TP Industrial Holding S.p.A. shares previously
held by Pirelli & C. S.p.A.. TP Industrial Holding S.p.A is the company into which
Pirelli's Industrial assets were merged. As a result of the assignment, TP Industrial
Holding S.p.A. and Pirelli & C. S.p.A. are therefore 100% controlled by Marco Polo
International Holding Italy S.p.A., the vehicle through which the partnership between
CNRC (at 65%), Camfin (at 22.4%) and Long-Term Investments Luxembourg (at
12.6%) was realised. The Board of Directors of TP Industrial Holding S.p.A. was
renewed with the appointment of Ren Jianxin (the Chairman of Pirelli) as President,
Marco Tronchetti Provera (the Executive Vice President and CEO of Pirelli) as Vice
Chairman and Paolo Dal Pino (the CEO of Pirelli Industrial) as Chief Executive
Officer. Effective as of April 1, 2017, Pirelli Industrial S.r.l. has changed its name to
Prometeon Tyre Group S.r.l. (“PTG”).
8
GROUP PERFORMANCE AND RESULTS
In this document, in addition to the financial figures as provided for by the
International Financial Reporting Standards (IFRS), alternative performance
indicators derived from IFRS were used in order to allow for a better assessment of
the progress of the Group’s operations. These indicators are: Gross Operating
Margin, Adjusted EBIT, Fixed Assets, Provisions, Operating Working Capital, Net
Working Capital and Net Financial Liquidity/(Debt) Position. Reference should be
made to the paragraph “Alternative Performance Indicators” for a more detailed
description of these indicators.
Also, as a result of the assignment by Pirelli & C. S.p.A to Marco Polo International
Italy S.p.A., of TP Industrial Holding S.p.A. shares, the company into which Pirelli's
Industrial assets were merged, the Industrial business (with the sole exception of
some residual business activities in Australia and Chile) qualified as a discontinued
operation. The results for the period for the discontinued operation were reclassified
to the Income Statement as a single item, "net income (loss) from discontinued
operations". The comparable income statement data for 2016 was subjected to
restatement.
It is also to be noted that due to the effect of the completion of the definitive
allocation of the price paid by Marco Polo Industrial Holding S.p.A. for the
acquisition of the Pirelli Group at fair value of assets and liabilities (the Purchase
Price Allocation - PPA), the results for the first quarter of 2016 were subjected to
restatement.
During the month of October 2016, the acquisition of Aeolus Car assets was also
completed. As of that date, the company's results were included in the results of the
Group.
* * *
9
The results for the first quarter of 2017 reflect the launch of Pirelli as a 'pure
Consumer tyre player' with the implementation of new projects which aim to
strengthen its positioning on high-value segments, and the development of new
activities aimed at capturing new trends in mobility.
Results were characterised by:
continued focus on the Premium segment (tyres with a rim diameter equal to or
greater than 17 inches for the car business, and radial and X-ply custom touring
tyres, offroad and Sport Touring tyres with a speed rating of ≥H for the
motorcycle business) with a growth in volumes of +15.3% which was superior to
that of the market trend (+11%). The Premium proportion of revenues reached
67.8% (66.2% for 2016 on a like-for-like basis);
an increase in revenues of +13.4% of which:
- 4% was attributable to the positive exchange rate effect;
- 1% was attributable to the consolidation of Aeolus Car assets in China which
allowed for the immediate acquisition of approximately 4 million in
production capacity in terms of volumes, and whose conversion back to the
Pirelli brand has already begun as of October 2016 for the purpose of
expediating development in China which will act as the engine for the global
growth of the Premium segment;
- organic growth of +8.4% which reflects the strengthening of the Premium
value strategy.
In particular, this trend reflects:
- the marked improvement of the price/mix (+5.5%) which again attained the
highest level amongst its peers and which was attributable the improved product
mix, and price increases in emerging markets;
- an increase in volumes of +2.9%, which on the one hand reflects the progressive
exit from unprofitable segments, particularly in LatAm and Russia, with a
decrease in Non-Premium volumes of -9.1%, and on the other hand reflects the
strengthening of the Premium segment (+15.3%) which is experiencing growth in
all regions, superior to that of the market trend (+11%).
10
improved operating performance in absolute values, with an adjusted EBIT of
euro 205.0 million (compared to euro 203.6 million for the corresponding period
of the previous financial year). The improved result is due to the effect of internal
levers such as the price/mix, volumes and efficiencies, which more than
compensated for the increase in the cost of raw materials, costs inflation
(particularly in emerging markets), higher amortisation and depreciation and
other costs due to the development of the Premium segment and of new business
(Cyber Tyre and Velo). For the first quarter, the adjusted EBIT margin amounted
to 15.3% compared to 17.2% for the corresponding period of the previous
financial year and prevalently reflects the new value generating programmes for
the medium term.
In particular:
- the aforementioned consolidation of Aeolus Car activities in China;
- the strenghtening of Premium segment positioning along the entire value
chain, from the installment of new capacity to trade and consumer
engagement activities;
- the effort to accelerate the reduction in exposure to segments with low
profitability;
- the start-up of new activities which intercept new end-consumer needs such
as connectivity, and the return to the bike business through the Velo project;
- one-off costs attributable to the separation of the Industrial business;
- the time lag between the price increases which were effective as of April 1,
2017 for all products and the increase in the cost of raw materials.
a net financial liquidity/(debt) position of euro 5,525.2 million, with a negative
seasonal cash flow absorption of euro 612.4 million (a negative seasonal cash
flow absorption for the first quarter of 2016 of euro 779 million).
11
The Group’s Consolidated Financial Statements are summarised as follows:
(in millions of euro)
03/31/2017 03/31/2016
Restated *
12/31/2016
Restated **
12/31/2016
Reported
Net sales 1,339.3 1,180.9 4,976.4 6,058.4
Gross operating margin before non-recurring and restructuring
expenses 270.4 261.5 1,083.4 1,183.2 % of net sales 20.2% 22.1% 21.8% 19.5%
Adjusted operating income (loss) 205.0 203.6 849.2 896.6
% of net sales 15.3% 17.2% 17.1% 14.8%
Adjustment: - amortisation of intangible assets included in PPA (26.2) (26.2) (104.6) (105.8)
- non-recurring and restructuring expenses (10.1) (11.3) (78.9) (66.6)
Operating income (loss) 168.7 166.1 665.7 724.2
% of net sales 12.6% 14.1% 13.4% 12.0%
Net income (loss) from equity investments (3.1) (42.5) (20.0) (20.0)
Financial income/(expenses) (77.0) (133.7) (418.8) (440.3)
Net income (loss) before tax 88.6 (10.1) 226.9 263.9
Tax expenses (39.1) (20.3) (92.5) (116.3)Tax rate % on net income (loss) before tax (44.1%) ns (40.8%) 44.1%
Net income (loss) from continuing operations (Consumer) 49.5 (30.4) 134.4 147.6
Net income (loss) from discontinued operations (Industrial) (76.6) (19.7) 13.2 -
Total net income (loss) (27.1) (50.1) 147.6 147.6
Net income attributable to the Parent Company (27.9) (50.7) 135.1 135.1
Fixed assets: - in continuing operations 9,213.6 10,299.2
Inventories 925.5 1,055.6
Trade receivables 1,044.8 679.3
Trade payables (1,062.2) (1,498.5)
Operating Net working capital 908.1 236.4
% of net sales (°) 17.0% 3.9%
Other receivables/other payables 118.3 (310.7)
Net working capital 1,026.4 (74.3)
% of net sales (°) 19.2% (1.2%)
Net invested capital held for sale 118.3 -
Net invested capital 10,358.3 10,224.9
Equity 3,002.9 3,274.9
Provisions 1,830.2 2,037.2
Net financial (liquidity)/debt position 5,525.2 4,912.8
Equity attributable to the Parent Company 2,929.1 3,134.1
Investments in property, plant and equipment and intangible assets 98.3 372.2
Research and development expenses 56.7 228.1 % of net sales 4.2% 3.8%
Research and development expenses - Premium 50.3 191.0% on sales Premium 5.5% 5.9%
Employees (headcount at end of period) 30,220 37,050
Industrial sites (number) 17 19
(°) in interim periods net sales are calculated on the annual basis
(**) the figures refer to the restated consolidated financial statements of Pirelli following the classification of the income statement data of the Industrial business in the
item "Net income (loss) from discontinued operations"
(*) the figures refer to the restated consolidated financial statements of Pirelli & C. post merger with Marco Polo Industrial Holding S.p.A. following the completion of
the PPA and the classification of the income statement data of the Industrial business in the item "Net income (loss) from discontinued operations"
12
Group net sales amounted to euro 1,339.3 million, which in organic terms
represented a growth (net of exchange rates and on a consolidated like-for-like basis)
of +8.4% compared to the corresponding period of 2016. Including the positive
impact of the exchange rate effect (+4.0%), consolidated revenues increased by
+12.4% compared to the previous year on a like for like basis (+13.4% also
including the positive change in scope at revenue level of +1 percentage point due to
the consolidation of Aeolus Car). Premium revenues amounted to euro 907.4 million
for the first quarter of 2017, which represented growth of +16% net of the exchange
rate effect compared to the corresponding period of the previous financial year (an
overall growth of +14.8%).
The market drivers for the net sales performance were as follows:
2017
Volume 2.9%
of which Premium volume 15.3%
Price/mix 5.5%
Change on a like-for-like basis - same scope of consolidation 8.4%
Translation effect 4.0%
Change in scope of consolidation - Aeolus car 1.0%
Total change 13.4%
1 Q
The performance for total tyre volumes for 2017 resulted in a total growth of +2.9%
and reflected the diverse dynamics within the different segments and markets. The
growth in volumes was supported by the growth of the Premium segment (+15.3%)
while the Non-Premium segment (-9.1%) was impacted by the reduction in volumes
and lower profitability particularly in Russia (with a sharp contraction in local sales
for the Amtel brand), and in LatAm.
The strong price/mix improvement (+5.5%) reflects the continuation of the Pirelli
value strategy and was supported by the success of high-end products. Price
increases, as previously announced, were effective as of April 1, 2017 to counter the
high volatility of raw materials.
13
Net sales by geographical area were composed as follows:
GEOGRAPHICAL AREA
Euro\mln yoy
Europe 569.9 7.8% 42.6% 44.8%
Russia and CIS 40.7 14.3% 3.0% 3.0%
NAFTA 250.9 16.5% 18.7% 18.2%
South America 227.3 18.8% 17.0% 16.2%
Asia\Pacific (APAC) 186.5 26.6% 13.9% 12.5%
Middle East\Africa\India (MEAI) 64.0 2.4% 4.8% 5.3%
TOTAL 1,339.3 13.4% 100.0% 100.0%
03/31/2017 03/31/2016
APAC (13.9% of sales) along with NAFTA were the regions with the highest
revenue growth and profitability (EBIT margin in the twenties). There was an
improvement in revenue performance of +26.6%, which as of 2017 included Aeolus
Car sales (consolidated as of October 1, 2016). Net of the exchange rate effect
(positive by +0.7%) on a like-for-like-basis (with a positive effect of +3.2% due to
Aeolus Car) organic growth equalled +22.7% and was supported by the Premium
segment (a specific organic growth of +28.9%) due to the increased market exposure
on the Original Equipment channel (which counted new homologations with
European and local car brands) and to the expansion of the commercial presence
which now counts approximately 4,000 outlets.
During the first quarter, the activities for the conversion of Aeolus brand production
into Pirelli brand production in the Aeolus tyre manufacturing plant for the Car
segment, acquired on October 1, 2016, were initiated.
NAFTA (18.7% of sales) recorded an organic growth in revenues of +13.7%
(+16.5% including the exchange rate effect). Revenue performance reflected the
positive trend in volumes, in particular that of the Premium e SuperPremium
segments thanks to the introduction of all-season products and the greater penetration
of the retail channel. Profitability (EBIT margin) was in the twenties range.
14
Europe (42.6% of sales) ended the first quarter with profitability in the mid-teens
which represented a slight reduction compared to the corresponding period of 2016,
due to increased investments in the Premium segment and to the aforementioned time
lag in adjusting prices for the Original Equipment channel following the increased
cost of raw materials. The growth in total revenues for the area was equal to +7.8%
(+8.9% for organic growth) sustained by the good performance of the Premium
segment.
MEAI (4.8% of sales) recorded a growth in revenues of +2.4% (+3.8% net of the
exchange rate effect on a like-for-like basis) with profitability in the mid-teens which
represented a decrease compared to the corresponding period of 2016 (high teens)
also due to the impairment of currencies particularly in Turkey.
In Russia (3.0% of sales) the strategy of focusing on the more profitable segments
plus the progressive reduction in production and sales of non-Pirelli brand products
impacted positively on the results of the quarter. In organic terms, revenues recorded
a contraction of -16.9% (+14.3% including the exchange rate effect), with growth in
profitability (EBIT margin in the high single digits which instead had been negative
for the first quarter of 2016) due both to the improvement of the sales mix and the
positive exchange rate effect.
South America (17.0% of sales) recorded a revenue growth of +18.8%, -3.2% in
organic terms (excluding the exchange rate effect on a like-for-like basis). This
performance reflects:
continuing focus on the mix, with the progressive reduction in sales on the
less profitable Non-Premium segment;
the destination of a portion of production for export to North America in view
of the growing demand for Premium Pirelli products;
contraction of the car market in Argentina.
15
Profitability was in the mid-single-digits which represented a reduction compared to
the corresponding period of 2016 (double-digits) due to the continuous efforts for the
improvement and conversion of the mix and for the reduction of sales in the
Argentinian market.
The Group's adjusted operating income (loss) - before non-recurring and
restructuring expenses and the amortisation of the intangible fixed assets included in
the PPA - amounted to euro 205 million representing an increase of euro 1.4 million
(euro 203.6 million recorded for the corresponding period of 2016).
Specifically, the adjusted operating income (loss) for the Group was as follows:
(in millions of euro)
1 Q
2016 Adjusted operating income (loss) 203.6
Differences from foreign currency translation from consolidation 4.0
Price/mix 39.6
Volumes 16.4
Cost of prodution factors (raw materials and inflation net of efficiencies) (20.2)
Amortisation, depreciation and other costs related to the development of
Premium and other businesses (38.4)
Change 1.4
2017 Adjusted operating income (loss) 205.0
The improved result was linked to the effect of internal levers such as price/mix,
volumes and efficiencies, which more than compensated the increased cost of raw
materials, costs inflation (particularly in emerging markets), higher amortisation and
depeciation and other costs related to business development.
In particular:
growth in volumes (euro 16.4 million);
improvement of the price/mix component (euro +39.6 million) plus exchange
rate differences (euro +4 million);
16
which more than compensated for:
the increase in the costs of raw materials and inflation net of efficiencies
(euro -20.2 million);
higher amortisation and depreciation and an increase in other costs linked to
the development of the Premium segment and of new business (Velo and
Connesso) and to the conversion of Aeolus brand production into Pirelli
brand production in the tyre manufacturing plant for the Car segment, in
Jiaozuo, acquired by Aeolus (euro -38.4 million);
The operating income of the Group which amounted to euro 168.7 million
(compared to euro 166.1 million for the corresponding period of the previous
financial year) was impacted by:
- non-recurring and restructuring expenses to the amount of euro 10.1 million
(euro 11.3 million for the first quarter of 2016) due to structural
rationalisation activities and activities under way for the integration of
Pirelli’s Industrial segment with the Industrial assets of the China National
Tire & Rubber Co., Ltd.;
- euro 26.2 million relative to the amortisation of the intangible fixed assets
identified during the Purchase Price Allocation (consistent with 2016).
The income (loss) from equity investments of the Group was negative to the
amount of euro 3.1 million and was mainly related to the pro-rata share of the results
for the Indonesian PT Evoluzione Tyres Joint Venture (euro -2.6 million) and the
pro-rata negative result for Prelios S.p.A. (euro -0.6 thousand). At March 31, 2016
the income (loss) from equity investments was negative to the amount of euro 42.5
million and included the pro-rata share of Prelios S.p.A. losses (euro 5.8 million), the
pro-rata share of losses for Fenice S.r.l. (euro 20.4 million), the impairment due to
the dilution of the investment in Prelios S.p.A. (euro 9.9 million), and the impairment
of the investment in the RCS MediaGroup (euro 3.5 million).
17
Net income (loss) from continuing operations at March 31, 2017 amounted to euro
49.5 million compared to the loss of euro 30.4 million for the first quarter of 2016.
Other than the improvement in the operating income and net income from
investments, the results also reflect a reduction in net financial expenses of euro
56.7 million (which amounted to euro 77.0 million for the first quarter of 2017
compared to euro 133.7 million for the first quarter of 2016, impacted by euro 25.4
million linked to the extinction of the US Private Placement bond loan). The
reduction of net financial expenses was mainly attributable to the lower cost of debt
(5.42% for the first quarter of 2017 compared to 5.98% for the first three months of
2016). Tax expenses for the first quarter of 2017 amounted to euro 39.1 million due
to earnings before tax of euro 88.6 million with a tax rate which stood at 44.1%.
Net income (loss) from discontinued operations refers to the Industrial business
(with the sole exception of some residual activities in Chile and Australia) and was
negative for the total amount of euro 76.6 million. This result includes the net income
from discontinued operations which was positive to the amount of euro 3.6 million,
and the reversal to the Income Statement of translation differences which matured at
the date of the assignment and which were negative to the total amount of euro 80.2
million.
The net income (loss) attributable to Pirelli & C. S.p.A. was negative to the
amount of euro 27.9 million compared to the negative amount of euro 50.7 million
for the corresponding period of the previous financial year.
18
Equity went from euro 3,274.9 million at December 31, 2016 to euro 3,002.9 million
at March 31, 2017.
Equity attributable to Pirelli & C. S.p.A. at Marzo 31, 2017 amounted to euro
2,929.1 million compared to euro 3,134.1 million at December 31, 2016.
This change is analytically shown in the table below:
(in millions of euro)
Group Non-controlling
interests
Total
Equity at 12/31/2016 3,134.1 140.8 3,274.9
Translation differences 85.5 (0.4) 85.1
Net income (loss) (27.9) 0.9 (27.0)
Fair value adjustment of other financial assets / derivative instruments 25.3 - 25.3
Disposal of 38% Pirelli Industrial to Cinda fund 1.5 264.5 266.0
Assignment of the Industrial business to Marco Polo (289.4) (326.7) (616.1)
Liquidation of equity investments - (5.5) (5.5)
Other (0.0) 0.2 0.2
Total changes (205.0) (67.0) (272.0)
Equity at 03/31/2017 2,929.1 73.8 3,002.9
19
The net financial liquidity/(debt) position of the Group was negative to the
amount of euro 5,525.2 million compared to euro 4,912.8 million at December 31,
2016. The composition of the net financial liquidity/(debt) position of the Group was
as follows:
(in millions of euro)
03/31/2017 12/31/2016
Current borrowings from banks and other financial institutions 1,689.8 642.1
Current derivative financial instruments 29.3 35.7
Non-Current borrowings from banks and other financial institutions 4,426.6 5,946.0
Total gross debt 6,145.7 6,623.8
Cash and cash equivalents (458.0) (1,533.0)
Securities held for trading (24.9) (48.6)
Current financial receivables and other assets (17.5) (30.0)
Current derivative financial instruments (21.5) (3.7)
Non-current financial receivables and other assets (98.6) (95.7)
Total financial receivables and cash (620.4) (1,711.0)
Total net financial (liquidity)/debt position 5,525.2 4,912.8
The structure of the gross financial debt, which amounted to euro 6,145.7 million,
was as follows:
(in millions of euro)
Financial
Statements
03/31/2017
Maturity date
2017 2018 2019 2020 2021 2022 and
beyond
Use of senior facilities 4,719.3 175.9 1,198.8 1,371.7 351.9 1,621.0 -
Bond 1,750% - 2014/2019 600.0 - - 600.0 - - -
EIB loans 50.0 20.0 20.0 10.0 - - -
Schuldschein 5.0 5.0 - - - - -
Other loans 771.4 610.8 156.6 2.6 0.9 - 0.5
Total gross debt from continuing operations 6,145.7 811.7 1,375.4 1,984.3 352.8 1,621.0 0.5
13.2% 22.4% 32.3% 5.7% 26.4% 0.0%
At March 31, 2016, the Group had a liquidity margin equal to euro 1,397.0 million
composed of euro 914.1 million in the form of a non-utilised nominal credit facility
(the total amount for the Senior Facilities at March 31, 2017 was euro 5,656.1
million, following the partial repayment of the original euro 1,600.0 million credit
facility), and euro 482.9 million in cash and cash equivalents and securities held for
trading.
20
The performance for cash flows for the period was as follows:
(in millions of euro)
2017 2016
Restated
Adjusted operating income (loss) 205.0 203.6
Amortisation and depreciation 65.4 57.9
Investments in property, plant and equipment and intangible assets(98.3) (70.0)
Change in working capital/other (892.2) (783.8)
Operating net cash flow (720.1) (592.3)
Financial income/(expenses) (77.0) (133.7)
Tax expenses (39.1) (20.3)
Ordinary net cash flow (836.2) (746.3)
Financial (investments) / disinvestments (1.7) (5.2)
Cash Out for non-recurring and restructuring expenses (11.9) (17.7)
Disposal of minority equity investments (5.5) -
Reversal of release of the provision for deferred tax liabilities included
in tax expenses (6.6) (6.4)
Differences from foreign currency translation/other (19.8) (62.7)
Net cash flow before dividends paid / extraordinary
transactions (881.7) (838.3)
Industrial reorganization 269.3 59.3
Net cash flow (612.4) (779.0)
1 Q
More specifically, the operating net cash flow for 2017 was negative to the amount
of euro 720.1 million (a seasonal negativity of euro 592.3 million for 2016), after
having sustained investments of euro 98.3 million (euro 70.0 million for 2016)
primarily aimed at increasing the capacity of the Premium segment in Europe and
NAFTA, and at the continuous improvement of the mix and quality in all
manufacturing plants.
The performance of the operating net cash flow, compared to the first quarter of
2016, was mainly due to changes in the working capital (euro 892.2 million in cash
flow absorption for 2017, compared to euro 783.8 million for 2016), due to some
temporary changes in working capital items for the industrial sector companies.
21
Net cash flow before extraordinary transactions was negative to the amount of
euro 881.7 million compared to the negative result of euro 838.3 million recorded for
2016.
Total net cash flow was negative to the amount of euro 612.4 million (negative to
the amount of euro 779.0 million for the corresponding period of 2016), and for 2017
includes the positive effect (euro 269.3 million) resulting from the finalisation of the
reorganisation of the Industrial business, while for the corresponding period of 2016
the net financial liquidity/(debt) position of the Industrial business was positive to the
amount of euro 59.3 million.
22
SIGNIFICANT EVENTS SUBSEQUENT TO THE END OF THE QUARTER
On April 28, 2017 the Board of Directors announced the intention to accelerate the
previously announced listing process in order to take advantage of market
opportunities as early as of the fourth quarter of 2017. The decision was made in the
light of the positive results achieved by the company, the implemented focus on the
Consumer business - which makes Pirelli the sole "pure Consumer tyre player" for
the segment - and the current favourable dynamics of the markets.
On the basis of these assumptions, Pirelli's Board of Directors and that of its sole
shareholder Marco Polo International Italy S.p.A. approved the transaction -
proposed by a pool of primary banks comprising Banca IMI (Intesa Sanpaolo group),
J.P. Morgan and Morgan Stanley – which allowed for the acceleration the IPO
process due to Pirelli's improved financial profile following the reduction of the net
debt/EBITDA ratio to less than 3. In particular, the following is foreseen:
- the granting on the part of the banks to Marco Polo of financing amounting to
euro 1.25 billion which will entirely reimbursed with the income from the
IPO;
- a capital increase of euro 1.2 billion for Pirelli & C. S.p.A. which will be
subscribed to entirely by Marco Polo and which will reimburse the same
amount of part of the Pirelli Group’s current debt;
- the refinancing of Pirelli's credit facilities for a total of euro 4.2 billion as well
as the improvement of the existing terms and conditions. The refinancing
operation will allow Pirelli to reduce the cost of its debt as well as prolong it
average maturity.
The Pirelli listing is expected to be on the Milan Stock Exchange or on one of the
major international level stock exchanges, and with a free float that will be defined
prior to the launch. In the context of the listing, the CNRC confirmed its willingness
to assist in the greater success of the IPO, by cutting its share in Pirelli to below 50%
without prejudice to the requisite conditions for consolidating Pirelli. The Board of
Directors also appointed Banca IMI (Intesa Sanpaolo group), J.P. Morgan and
Morgan Stanley as Global Coordinators of the operation.
23
ALTERNATIVE PERFORMANCE INDICATORS
This document, in addition to the financial measures as provided for by the
International Financial Reporting Standards (IFRS), also includes measures derived
from the latter even though not provided for by the IFRS (Non-GAAP Measures).
These measures are presented in order to allow for a better assessment of the results
of Group operations and must not be considered as alternatives to those required by
IFRS.
In particular, the Non-GAAP Measures used are as follows:
- Gross operating margin: an intermediate economic measure which derives
from the operating income (loss) and which excludes the amortisation of
intangible and the depreciation of tangible assets (property, plant and
equipment);
- Adjusted operating income (loss): the adjusted operating income (loss) is an
intermediate measure, which derives from the operating income (loss) and which
excludes, the amortisation of intangible assets related to assets detected as a
consequence of Business Combinations, as well as operational costs attributable
to non-recurring and restructuring expenses. Of particular note are the
amortisable intangible fixed assets detectable during the PPA. It is to be noted
that these assets are related to activities which are continuously regenerated
internally, within the company, and which incur costs which are not capitalised,
and which end up duplicating the amortisations created by way of the effect of
the PPA. Therefore in order to neutralise this effect a new intermediate economic
measure was implemented, namely the adjusted operating income (loss).
- Fixed assets: this measure is constituted by the sum of the items "Property, plant
and equipment", "Intangible fixed assets", "Investments in associates and joint
ventures" and "Other financial assets";
- Provisions: this measure is constituted by the sum of "Provisions for liabilities
and charges (current and non-current)", "Employee benefit obligations" and
"Provisions for deferred taxes";
- Operating working capital: this measure is constituted by the sum of
"Inventory", "Trade receivables" and "Trade payables";
24
- Net working capital: this measure consists of the operating working capital and
other receivables and payables not included in the “Net financial liquidity/(debt)
position";
- Net financial liquidity/(debt) position:this measure is represented by the gross
financial debt less cash and cash equivalents as well as financial receivables.
25
OTHER INFORMATION
Role of the Board of Directors
The Board of Directors is responsible for the strategic guidance and supervision of
the overall business activities, with the power to address its administration as a
whole, and is empowered in the undertaking of the most important financial/strategic
decisions, or decisions which have a structural impact on operations or are functional
decisions, and to exercise the control and direction of Pirelli.
The Chairman is endowed with the legal representation of the Company including in
the legal proceedings of the Company, as well as all other powers attributable to the
Chairman in accordance with the Articles of Association.
The Executive Vice Chairman and CEO are delegated exclusive powers for the
ordinary management of the Company and the Group, as well as the power to
propose Industrial Plans and Budgets to the Board of Directors, as well as any
resolutions concerning any strategic industrial partnerships or joint ventures of which
Pirelli is a part.
The Board has internally instituted the following Committees with advisory tasks:
- Strategies Committee;
- Remuneration Committee;
- Nominations and Successions Committee;
- Audit Committee (with expertise also in the field of internal control,
risk,sustainability and the Group's corporate governance guidelines).
Information on the share capital and ownership structure
The subscribed and paid up share capital at the date of approval of this Financial
Report amounted to euro 1,345,381 thousand, and is represented by 207,625,214
registered shares without indication of their nominal value, which are subdivided as
follows:
Number of Shares % of Share Capital
Ordinary Shares 201,983,902 97.28%
Special Shares (*) 5,641,312 2.72%
(*) without voting rights
26
The special and ordinary shares are held by the sole shareholder Marco Polo
International Holding Italy S.p.A., with the exception of 351,590 ordinary treasury
shares and 772,792 special treasury shares which are held by Pirelli & C. S.p.A.
The company is subject to the management and coordination by Marco Polo
International Italy S.p.A., which is the sole shareholder of Marco Polo International
Holding Italy S.p.A.
Extracts of the Agreements dated August 2015 between the shareholders of Marco
Polo International Italy S.p.A. which contain the provisions relative to the
governance of Pirelli are available on the Company’s website.
Related party transactions
Related party transactions, including intra-group transactions, do not qualify as either
unusual or exceptional, but are part of the ordinary course of business for the
companies of the Group. Such transactions, when not settled under standard
conditions, or are dictated by specific regulatory conditions, are in any case regulated
by conditions consistent with those of the market.
The effects of the related party transactions contained in the Income Statement and
the Statement of Financial Position, on the consolidated financial data for the Pirelli
& C. Group at March 31, 2017 were as follows:
TRANSCATIONS WITH ASSOCIATES AND JOINT VENTURES
(in millions of euros)
Revenues from sales/services and other
income.0.6
The amount refers mainly to rental income and related rental property
management fees received from the Prelios Group (euro 2.0 million), and for
services rendered to PT Evoluzione Tyres (euro 0.4 million).
Other costs 9.7
This item includes acquisition costs for the purchase of energy and machine
hire from Industriekraftwerk Breuberg GmbH (euro 5.5 million), costs for the
acquisition of products from PT Evoluzione Tyres (euro 4.1 million ) and the
supply of services by the consortium CORIMAV (euro 0.1 million).
Financial income 0.1 The amount refers to interest on the loan granted by Pirelli International Plc and
Pirelli Tyre S.p.A. to PT Evoluzione Tyres.
Financial expenses 0.1 This item mainly refers to expenses payable to International Media Holding
S.p.A.
Other non-current receivables 20.0 This item refers to the loan granted by Pirelli International Plc and Pirelli Tyre
S.p.A. to PT Evoluzione Tyres.
Current trade receivables 1.7 This item includes receivables for services rendered to the Prelios S.p.A.
Group (euro 0.3 million) and to PT Evoluzione Tyres (euro 1.4 million).
Other current receivables 1.5 The amount refers to advances received from PT Evoluzione Tyres (euro 1.3
million) and to financial receivables from Fenice S.r.l. (euro 0.2 million).
Current borrowings from banks and other
financial institutions0.6
This item refers to the security deposit received from Prelios S.p.A. to
guarantee of the lease of the Milan office (long term portion).
Current trade payables 17.8 The amount mainly refers to payables for the purchase of energy from
Industriekraftwerk Breuberg GmbH.
27
TRANSACTIONS WITH OTHER RELATED PARTIES
(in millions of euros)
Revenues from sales and services 6.0
This item mainly refers to the sale of goods and services rendered by
Pirelli Tyre S.p.A. (euro 0.7 million) and Pirelli Pneus Ltda (euro 2.5
million) to Pirelli de Venezuela C.A., to royalties recognised by the
Aeolus Tyre Co., Ltd. (euro 1.9 million) and services rendered to the
Hangar Bicocca Foundation (euro 0.9 million).
Current trade receivables 139.1
This item includes receivables for royalties from Aeolus Tyre Co., Ltd
(euro 1.9 million) and for services rendered to Hangar Bicocca
Foundation (euro 1.2 million) and trade receivables to the amount of euro
136 million from the Industrial Group.
Other current receivables 155.2This item refers to receivables from the companies of the Industrial
Group
Current borrowings from banks and
other financial institutions25.0 This item includes financial payables to the Industrial Group.
Trade payables 110.9 This item includes trade payables to the Industrial Group.
Other current payables 23.0 This item includes trade payables to the Industrial Group.
Current financial instruments 2.2 This item refers to the companies of the Industrial Group.
Current tax payables 5.7 This item refers to the companies of the Industrial Group.
Non-current financial instruments 4.1 This item refers to the companies of the Industrial Group.
The Board of Directors
Milan, May 22, 2017
28
FINANCIAL STATEMENTS
29
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (in thousands of euro)
Property, plant and equipment 2,980,085 3,556,635
Intangible assets 5,968,503 6,496,889
Investments in associates and J.V. 43,825 47,010
Other financial assets 221,165 198,691
Deferred tax assets 115,780 147,964
Other receivables 212,167 226,868
Tax receivables 20,766 11,864
Non-current assets 9,562,291 10,685,921
Inventories 925,516 1,055,639
Trade receivables 1,044,807 679,321
Other receivables 468,689 275,622
Securities held for trading 24,864 48,597
Cash and cash equivalents 457,992 1,532,977
Tax receivables 84,311 64,395
Derivative financial instruments 36,016 23,989
Current assets 3,042,196 3,680,540
Assets held for sale 118,330 -
Total Assets 12,722,817 14,366,461
Equity attributable to owners of the Group: 2,929,083 3,134,085- Share capital 1,342,281 1,342,281
- Reserves 1,614,744 1,656,741
- Net income (loss) for the period (27,942) 135,063
Equity attributable to non-controlling interests: 73,798 140,773- Reserves 72,902 128,211
- Net income (loss) for the period 896 12,562
Total Equity 3,002,881 3,274,858
Borrowings from banks and other financial institutions 4,426,624 5,945,999
Other payables 76,242 87,421
Provisions for liabilities and charges 139,238 170,992
Provisions for deferred tax liabilities 1,311,164 1,452,169
Employee benefit obligations 341,162 368,100
Tax payables 2,682 3,374
Non-current liabilities 6,297,112 8,028,055
Borrowings from banks and other financial institutions 1,689,816 642,047
Trade payables 1,062,235 1,498,492
Other payables 482,390 783,079
Provisions for liabilities and charges 38,603 45,987
Tax payables 68,362 41,773
Derivative financial instruments 41,451 52,170
Current liabilities 3,382,857 3,063,548
Liabilities held for sale 39,967 -
Total Liabilities and Equity 12,722,817 14,366,461
03/31/2017 12/31/2016
30
Revenues from sales and services 1,339,276 1,180,874
Other income 171,848 181,022
Changes in inventories of unfinished, semi-finished and finished products 31,808 (208,289)
Raw materials and consumables used (net of change in inventories) (471,311) (333,663)
Personnel expenses (273,855) (247,875)
Amortisation, depreciation and impairment (91,895) (84,048)
Other costs (538,013) (322,541)
Increase in fixed assets for internal work 835 626
Operating income (loss) 168,693 166,106
Net income (loss) from equity investments (3,135) (42,482)
- share of net income (loss) of associates and j.v. (3,200) (35,779)
- gains on equity investments 185 8,407
- losses on equity investments (120) (15,110)
- dividends - -
Financial income 58,560 28,228
Financial expenses (135,523) (161,993)
Net income (loss) before tax 88,595 (10,141)
Tax (39,064) (20,328)
Net income (loss) from continuing operations 49,531 (30,469)
Net income (loss) from discontinued operations (76,577) (19,698)
Total net income (loss) for the period (27,046) (50,167)
Attributable to:
Owners of the parent company (27,942) (50,729)
Non-controlling interests 896 562
1/1 - 03/31/2017 1/1 - 03/31/2016 (*)
CONSOLIDATED INCOME STATEMENT (in thousands of euro)
(*) the figures refer to the restated consolidated financial statements of Pirelli & C. post merger with Marco Polo Industrial Holding S.p.A. following the completion of the
PPA and the classification of the income statement data of the Industrial business in the item "Net income (loss) from discontinued operations"
31
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (in thousands of euro)
1/1 - 03/31/2017 1/1 - 03/31/2016 (*)
A Net income (loss) for the period (27,046) (50,167)
B - Items that will not be reclassified to income statement:
- Net actuarial gains (losses) on employee benefits - -
- Tax effect (1,221) -
Total B (1,221) -
C - Items reclassified / that may be reclassified to income statement:
Exchange differences from translation of foreign financial statements
- Gains / (losses) for the period 4,896 (47,717)
- (Gains) / losses reclassified to income statement 80,208 -
Fair value adjustment of other financial assets available for sale:
- Gains / (losses) for the period 20,749 (45,689)
Fair value adjustment of derivatives designated as cash flow hedges:
- Gains / (losses) for the period 7,207 (3,319)
- (Gains) / losses reclassified to income statement 66 8,277
- Tax effect (1,458) (1,872)
Share of other comprehensivie income related to associates and JVs net of tax - (493)
Total C 111,668 (90,813)
D Total components of comprehensive income (B+C) 110,447 (90,813)
A+D Total comprehensive income (loss) for the period 83,401 (140,980)
Attributable to:
- Owners of the Parent 82,944 (139,299)
- Non-controlling interests 457 (1,681)
Other components of comprehensive income:
(*) the figures refer to the restated consolidated financial statements of Pirelli post merger with Marco Polo Industrial Holding S.p.A. following the completion of the PPA and the
classification of the income statement data of the Industrial business in the item "Net income (loss) from discontinued operations"
32
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AT 03/31/2017
(in thousands of euro)
TOTAL
Share Capital Translation
reserve
Total IAS
Reserves *
Other reserves/
retained
earnings
Total
attributable to
the Parent
Company
Total at 12/31/2016 1,342,281 (204,778) (61,629) 2,058,211 3,134,085 140,773 3,274,858
Other components of comprehensive income - 85,542 25,344 - 110,886 (439) 110,447
Net income (loss) for the period - - - (27,942) (27,942) 896 (27,046)
Total conprehensive income (loss) - 85,542 25,344 (27,942) 82,944 457 83,401
Dividends paid - - - - - - -
Disposal of 38% Pirelli Industrial to Cinda fund - - - 1,520 1,520 264,500 266,020
Assignment of Pirelli Industrial to Marco Polo - - (12,043) (277,397) (289,440) (326,679) (616,119)
Liquidation of equity investments - - - - - (5,540) (5,540)
Other - - (147) 122 (25) 287 262
Total at 03/31/2017 1,342,281 (119,236) (48,475) 1,754,514 2,929,083 73,798 3,002,881
Attributable to the Parent Company Non controlling
interests
(in thousands of euro)
Reserve for fair
value adjustment of
available-for-sale
financial assets
Reserve for cash
flow hedge
Reserve for
actuarial
gains/losses
Tax effect Total IAS
reserves
Balance at 12/31/2016 (19,282) 1,038 (44,023) 638 (61,629)
Other components of comprehensive income 20,749 7,274 - (2,679) 25,344
Assignment of Pirelli Industrial - - (602) (11,441) (12,043)
Other (318) - 171 - (147)
Balance at 03/31/2017 1,149 8,312 (44,454) (13,482) (48,475)
Breakdown of IAS reserves *
33
CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands of euro)
Net income (loss) before taxes 88,595 (10,141)
Reversals of amortisation, depreciation, impairment losses and restatement of
property, plant and equipment and intangible assets 91,895 84,048
Reversal of Financial expenses 135,523 161,993
Reversal of Financial income (58,560) (28,228)
Reversal of Dividends - -
Reversal of gains/(losses) on equity investments (65) 6,703
Reversal of share of net income from associates and joint ventures 3,200 35,779
Ordinary taxes (39,064) (20,328)
Change in Inventories (28,573) (22,712)
Change in Trade receivables (265,000) (182,138)
Change in Trade payables (284,844) (412,275)
Change in Other receivables/Other payables (151,042) (53,876)
Change in Provisions for employee benefit obligations and Other provisions (37,962) (12,811)
Other changes (4,031) 6,439
A Net cash flows provided by / (used in) operating activities (549,929) (447,547)
Investments in property, plant and equipment (97,446) (70,305)
Disposal of property, plant and equipment 2,479 1,083
Investments in intangible assets (942) (678)
Disposals (Acquisition) of financial assets (1,678) (5,156)
Dividends received - -
B Net cash flows provided by / (used in) investing activities (97,587) (75,056)
Change in Financial payables (459,518) 179,790
Change in Financial receivables/Securities held for trading 219,855 94,910
Financial income / (expenses) (76,963) (133,765)
Dividends paid - -
C Net cash flows provided by / (used in) financing activities (316,626) 140,935
D Net cash flows provided by (used in) discontinued operations (145,690) (53,885)
E Total cash flows provided / (used) during the period (A+B+C+D) (1,109,832) (435,553)
F Cash and cash equivalents at the beginning of the period 1,523,928 1,067,158
G Exchange differences from translation of cash and cash equivalents 2,839 (25,444)
H Cash and cash equivalents at the end of the period (E+F+G) (°) 416,935 606,161
(°) of which:
cash and cash equivalents 457,992 636,506
passive current accounts (41,057) (30,345)
1/1 - 03/31/2017 1/1 - 03/31/2016 (*)
(*) the figures refer to the restated consolidated financial statements of Pirelli following the classification of the Industrial business data in the item "Net
income (loss) from discontinued operations"
34
FORM AND CONTENT
This Interim Financial Report at March 31, 2017 has been prepared on a voluntary
basis since, following the delisting of Pirelli, the company has no statutory obligation
to prepare quarterly reports.
The accounting standards applied for the evaluation and measurement of the
accounting measures were the International Accounting Standards (IAS) and the
International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB) and the relative interpretations issued by the
International Financial Reporting Interpretations Committee (IFRIC), as approved by
the European Commission and in force at the time of approval of these Financial
Statements.
The accounting standards used are the same as those used for the preparation of the
consolidated Financial Statements at December 31, 2016, to which reference should
be made for further details. The following standards listed below came into force as
of January 1, 2017 but have not yet been approved by the European Union and are
therefore not applicable:
Amendments to IAS 12 - Recognition of Deferred Tax Assets for Unrealised
Losses: no impacts are foreseen on the Group's Financial Statements arising from
the application of these amendments.
Amendments to IAS 7 – Disclosure Initiative: these amendments did have an
impact on the disclosure of the Financial Statements of the Group.
Amendments to IFRS 2 - Share-based Payment: there were no impacts on the
Group's Financial Statements arising from the application of these amendments.
35
Exchange rates
(local currency vs euro)
Period-end exchanges rates Change in % Average exchange rates Change in %
03/31/2017 12/31/2016 2017 2016
Swedish Krona 9.5322 9.5525 (0.21%) 9.5063 9.3264 1.93%
Australian Dollar 1.3982 1.4596 (4.21%) 1.4056 1.5283 (8.03%)
Canadian Dollar 1.4265 1.4188 0.54% 1.4101 1.5136 (6.84%)
Singaporean Dollar 1.4940 1.5234 (1.93%) 1.5080 1.5463 (2.47%)
U.S. Dollar 1.0691 1.0541 1.42% 1.0648 1.1022 (3.39%)
Taiwan Dollar 32.4451 34.0748 (4.78%) 33.1010 36.5043 (9.32%)
Swiss Franc 1.0696 1.0739 (0.40%) 1.0694 1.0960 (2.43%)
Egyptian Pound 19.4406 20.1624 (3.58%) 19.0980 8.8820 115.02%
Turkish Lira (new) 3.9083 3.7099 5.35% 3.9346 3.2424 21.35%
New Romanian Leu 4.5511 4.5411 0.22% 4.5220 4.4905 0.70%
Argentinian Peso 16.4535 16.7497 (1.77%) 16.6956 15.9687 4.55%
Mexican Peso 20.1521 21.5539 (6.50%) 21.6482 19.8714 8.94%
South African Rand 14.2404 14.4570 (1.50%) 14.0814 17.4416 (19.27%)
Brazilian Real 3.3896 3.4042 (0.43%) 3.3523 4.2960 (21.97%)
Chinese Renminbi 7.3760 7.3123 0.87% 7.3323 7.1953 1.90%
Russian Ruble 60.5950 63.8111 (5.04%) 62.5923 82.3162 (23.96%)
British Pound 0.8555 0.8562 (0.08%) 0.8601 0.7704 11.65%
Japanese Yen 119.5500 123.4000 (3.12%) 121.0139 126.9926 (4.71%)
Net financial liquidity/(debt) position
(in thousand of euro)
Current borrowings from banks and other financial institutions 1,689,816 642,047
Current derivative financial instruments (liabilities) 29,254 35,742
Non-current borrowings from banks and other financial institutions 4,426,624 5,945,999 - -
Total gross debt 6,145,694 6,623,788
Cash and cash equivalents (457,992) (1,532,977)
Securities held for trading (24,864) (48,597)
Current financial receivables and other assets (17,490) (29,951)
Current derivative financial instruments (assets) (21,616) (3,718)
Non-current financial receivables and other assets (98,579) (95,714) - -
Total net financial (liquidity)/debt position 5,525,153 4,912,831
12/31/201603/31/2017